Bonus Disputes Employment Law
Bonus employment law & employment rights
Employment Law – Bonuses
Discretionary Bonuses
A common cause of conflicts in the workplace is the act of employers unfairly using their discretion to reduce the level of bonuses. It’s not uncommon for bonus schemes to express that they are at the discretion of the employer and usually contain some criteria for determining the qualification and amount of the bonus, with the statement that it is always at the discretion of the employer as to whether the bonus payment is actually made.
A number of court decisions in recent years have expressed that the employer must exercise its discretion on reasonable grounds and in good faith. Essentially if an employee meets the criteria for a bonus, the employer must be able to give evidence and have reasonable grounds for not paying that bonus. For example, the decision to not pay a bonus cannot be made on the basis that the employer has a dislike for the employee.
Contractual Bonuses
Contractual bonuses are far more structured and are usually based on a specific formula. This can range from personal performance indicators or overall team or business performance. The employer has far less chance to manoeuvre in these circumstances, and failure to adhere to the bonus payments (assuming all of the criteria have been met) may result in a breach of contract claim or constructive dismissal.
It may be the case that there is an element of discretion also built into a contractual bonus scheme.
Historical Practice
If in the past the employer regularly paid bonuses to employees who performed similarly, it may be difficult for them to give sufficient reason for withholding paying a bonus.
The Next Step
If you are looking for a No Win Fee Employment Law Solicitor to represent you at an employment tribunal, we need to assess the merits of your potential claim which we are normally happy to do free of charge.
Termination of Employment and Bonus Payments
It is quite common for people to be confused as to whether a bonus payment should still be made after termination of employment. Whether the employee has been dismissed or resigned is a major factor, as well as many other variables.
Gross Misconduct
If an employee has been dismissed for gross misconduct, it is highly unlikely that the employer is required to pay any outstanding bonuses. Generally, gross misconduct relates to an employee breaching their contract, resulting in their dismissal and forfeit of any unpaid bonuses. However, if this is subsequently deemed as an unfair dismissal, a claim for loss of earnings can often be made in conjunction.
Bonus Clauses
Oftentimes it is included within an employees contract that in order to be eligible for bonus payments they must be employed at the date of the bonus payment and must not be working under notice. This means that if you are resigned and give your notice prior to the bonus payment date, you may not be eligible to receive the bonus, even if you are still working during the bonus payment date.
If your employer has given you notice (for redundancy for example), there are 3 other scenarios to consider:
- You can work your notice period
- You are placed on garden leave
- PILON – Payment in lieu of notice
In the case of PILON, your employer will decide that you don’t need to work your notice and they bring forward your termination date. If your employer decides to take this route, it will be unlikely that you will receive your bonus payment as it is unlikely you will be working at the date of payment. In some cases your employer may opt for a pro-rata bonus payment, though it is uncommon – it is more common for employers to use PILON to hasten the process of an employee’s departure and to avoid paying any bonus.
If an employer can’t rely on a PILON clause and you work your notice or are placed on garden leave on the date of the bonus payment, the court is often on the side of employees. Employers are urged to honour the payment, particularly where bonuses are being paid to remaining staff members.
No PILON Clause
If there is no PILON clause present in your contract, if your employer decides to use PILON it is most likely a breach of contract and you have a good foundation to issue proceedings.
Making a Claim For Bonus Payments Not Being Made
An employment tribunal claim for non-payment for a bonus is common and it is important that you lodge your claim no later than 3 months less one day from the date that the bonus in question should have been paid.
We have a vast amount of experience in claims for non-payment of a bonus and are often happy to assess your case free of charge.
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